AI's Productivity Promises Face a Reality Check
Ambitious claims of AI driving up to 80% productivity gains in five years are unrealistic and risk destabilizing operational priorities, Tech Mahindra CEO Mohit Joshi told ET
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Ambitious claims of artificial intelligence driving up to 80% productivity gains in five years are unrealistic and risk destabilizing operational priorities, Tech Mahindra CEO Mohit Joshi told The Economic Times in an interview on Tuesday.
Joshi warned that such predictions are a “dangerous fantasy,” while pointing out that his company is opting for a more measured and realistic approach to leveraging AI, even as rivals tout dramatic productivity leaps to win deals.
“It is really a dangerous bet to make, and you can get caught with a huge amount of effort that you have not budgeted for,” Joshi told ET. “We don’t want to get caught in a situation where you make crazy assumptions and therefore you’re not able to invest back in the business. We should be aggressive, but it should not be in the realms of fantasy.”
The remarks come amid mounting concerns across India’s IT sector that AI is cannibalizing revenues as firms rush to pass on efficiency gains to clients at the expense of their own margins.
Joshi made it clear that Tech Mahindra would not join what he called a “growth at any price” race, warning that such an approach risks either slashing margins to unsustainable levels or unfairly squeezing employees through steep cuts to variable pay and other compensation.
Profit margins at India’s major software exporters are under pressure, with AI adoption presenting fresh challenges alongside macroeconomic headwinds.
Global clients are also reshaping their outsourcing deals with Indian IT firms as AI alters the economics of software services, Mint reported on Monday.
Instead of traditional fixed-price contracts, Fortune 500 clients are opting for more flexible arrangements that align payments to actual time and resources spent, the report said.
The shift highlights AI’s growing influence on India’s $280 billion IT services industry, forcing a rethink of long-established pricing models as faster project delivery and reduced human labor upend the status quo.
